[LNG MARKET ANALYSIS ] 1. LNG Market Analysis

Transcription

1 [LNG MARKET ANALYSIS ] 1 LNG Market Analysis LNG Market Analysis Volume: 23 rd March 2018

2 [LNG MARKET ANALYSIS ] 2 LNG Price Assessment and Natural Gas 12 th 23 rd March 2018 LNG Analysis Global LNG prices remained mixed with bearish trend in Asian market, where European market remained stable to bearish. Asian LNG prices bearish trend is attributed on adequate supply and weak demand as weather is getting warmer before the start of summer season in North East Asia along with resumption of nuclear power generation in Japan. In Japan 7 nuclear reactors has been cleared for restart with 17 more reactors applied for resumption, which will reduce demand for gas based power generation. Demand is low from Asian demand centers as market participants are in wait and see mode with bullish run on Brent also adding to the sentiments as market is expecting surplus supplies as contract buyers are focusing on buying minimum required quantities on contract. As per liquefaction forecast model, supply is adequate from as regular cargoes are leaving Sabine, Cove point and Yamal projects along with news on earlier start-up of PNG project. Asian price closures on Friday; NE Asia Delivered for April closed at $7.30/MMBTU, whereas May prices closed at $7.05/MMBTU, while long-term contract (2014 basis) price at $9.62/MMBTU & recent long term contract price of 11.1% Brent at 8.03, higher than spot prices. Japan received 1.59MMT (26 vessels), South Korea 1.09MMT (16 vessels), China 0.61MMT (10 vessels) and Taiwan 0.40MMT (6 vessels) during the week, NEA region represent 60.7% of a global trade this week. MTD March receipt: Japan 6.00MMT (99 vessels), South Korea 3.72MMT (54 vessels), China at 2.52MMT

3 [LNG MARKET ANALYSIS ] 3 (35 vessels) & Taiwan 1.13MMT (17 vessels). DES South Asia is calculated around $7.27/MMBTU for April & $6.56/MMBTU for May, whereas FOB ME estimated at $6.63/MMBTU & $6.38/MMBTU for April & May 2018 respectively. Brent based contract price is around $8.80/MMBTU for Pakistan and Henry Hub based prices for India at $6.78/MMBTU. India imported.54mmt (8 vessels), MTD 1.55MMT (19 vessels), while Pakistan received.14mmt (3 vessels) during the week, with MTD at 0.44MMT (6 vessels). North West Europe March LNG prices had a stable to bearish run as overall gas inventory stands at 22% for whole Europe and restocking activities will reaming active during summer along with fear of cold spike in near future. 4 vessels left from Russian projects, one from Yamal project for Netherlands, while three from Sakhalin project for Japan, South Korea and Taiwan. NW Europe LNG price closure estimates on Friday is $6.70/MMBTU for April and $6.47/MMBTU level for May. South West Europe prices also followed NW Europe trend as France low inventory level kept the gas price bullish to stable both in Day ahead and forward markets with support from bullish crude oil prices. Spain received 4 vessels, France 3, Italy 2, while UK, Belgium, Malta & Portugal one each. Turkey received 5 cargoes during the week. Mexico, Chile and Dominican Republic received one cargo during the week. This week understandably there hasn t been any reload activities from European terminal due to low inventory level and closure of arbitrage window for Asian destinations. Arbitrage window for European reloads remained closed this week also as FOB prices for reload terminal are coming around $6.55/MMBTU France, $6.48/MMBTU Spain and $6.33/MMBTU UK. US Gulf Coast producer netback price for April delivery is $6.20/MMBTU based upon SW Europe price. US Henry Hub based price is coming around $5.48/MMBTU on Friday for US based liquefaction companies, which translate into margin of $0.34/MMBTU for Asian destination, $0.52/MMBTU for NW Europe and $0.72/MMBTU for SW Europe. Four cargoes left from Sabine Pass export terminal during the week, two each for Europe, Mexico & TBC. NEA April price around $7.30/MMBTU level is estimated to be 11.00% of Brent basis, whereas for May price of $7.05/MMBTU, it is around 10.62% of Brent Author s Conclusion Crude oil prices bullish run impact on LNG prices are minimal as LNG spot prices are moving southward whereas all Brent based prices for long term contracts are higher, creating more bullish sentiments in the market. European gas hub prices remained stable to bullish due to restocking activities on lower inventory level, reduced gas flows, however LNG vessels arrivals in the region plus warm weather outlook has put bearish tone on LNG prices for short term. Henry Hub based pricing still attractive for European region, LNG prices are bearish in Asian market and based upon weak demand and ample supply we expect bearish trend to continue before summer based demand picks up. Overall supply is adequate and Brent bullish trend is also adding into LNG bearish trend. European price for next week look stable to bearish as there are number of vessel destined from Yamal & Qatar along with regular supply from Norway and Algeria. Market Analysis Weather North West Europe: NW Europe region had a sub zero weekend, which eased to cold weather during the week, with further easing up next week. South West Europe: SW Europe weather was cold to mild during the week with mild weather outlook. South America: Warm weather with same outlook. Middle East: Summers in Middle East. South Asia: Warm weather with same outlook. North East Asia: Mild above seasonal limit has been experience during the week with outlook for warmer weather in North East Asia. South East Asia: Summer season. North America: Mexico in warm season. US weather; North West, Central, Midwest & Northeast still in cold weather region with same outlook, mild weather in Northwest and warm weather in Southeast, South, Southwest and West regions.

4 [LNG MARKET ANALYSIS ] 4 Crude Oil Crude oil prices continued the bullish run from last week as fundamentals were supported Geopolitical tension between KSA & Iran, production decline in Venezuela, OPEC production cut news and EIA inventory update. Geopolitical tension on KSA s Crown Prince statement on 2015 Iranian Nuclear deal as flawed agreement. KSA energy minister reiterated confidence on OPEC production cut extension further in Venezuela oil production fell to 1.55 million barrel a day, down by 52,400 barrels per day in February 2018 from January Million Barrels (MBbl) 16-Mar Mar Mar Feb-2018 Production (MBbl/D) Exports (MBbl/D) Crude Inventory Gasoline Inventory EIA reported 2.62 million barrels surprise drawdown against expectation of 2.60 million barrel market expectations and gasoline inventory reported at decrease by 1.69 million against market expectation of 2.00 million barrels draw down. Bearish factors during the week were US President signing a memorandum on imposing tariffs on Chinese import and Chinese reply, which may result in trade war. Another bearish factor was continued US production, which stands at million barrels/day, increased by 1.27 million barrels from last year. With inventory increasing at Cushing by 0.90 million barrels from last week. US weekly export number stands at million barrels, increased by 86,000 barrels per day. Brent prices closed at $70.36/BBL, while WTI closed at $65.74/BBL, with Brent-WTI spread at $4.62/BBL on Friday. Future market closure on Friday for Brent front month at $70.31/BBL, with $69.76/BBL & $69.33/BBL for June & July, whereas WTI front month at $65.74/BBL, $65.59/BBL for June & $65.19/BBL for July. Long-term over-supply fundamentals still dictating the backwardation in Brent & WTI future market. Baker Hughes oil-rig count increased by 4 and now stands at 804. Natural Gas Henry Hub prices had a bearish run due to bearish factor overwhelming the bullish factor of weather which remained cold in North and warm in South along with bullish crude prices as lower inventory drawn and increased gas supply dictated the market direction. EIA reported working gas in storage is 1,446 BCF as of Friday, 16 th March 2018, net decrease of 86 BCF; against expectations of 87 BCF draw down. Overall supply increased to 86.2 BCF/Day from 85.9 BCF/Day of last week. With net import from Canada at 6.9 BCF/Day higher than last year supply of 6.2 BCF/Day. Demand decreased substantially from 95.3 BCF/Day of last week to 90.8 BCF/Day, Industrial and residential sector demand down by 6.62% week-on-week basis. Baker Hughes reported an increase in gas rigs by 1 and total number stands at 190. Henry Hub closure on Friday was $2.59/MMBTU, with future market closed at $2.58/MMBTU for April, $2.63MMBTU for May & $2.69/MMBTU for June, contango suggesting summer season demand. North West European gas hub prices had a bullish run majority of the week because of cold weather outlook and restocking activities along with reduced supply from Norwegian and Russian gas pipelines, however mild short term weather outlook, along with arrivals and expected arrival of LNG cargoes has eased the sentiments a bit. Gas flow from Norway reduced due to issue at Sieipner gas field and St. Fergus terminal along with reduced gas flows from Nel have impacted supplies to Germany and UK. Gas inventory level are still very low with Belgium at 10%, Germany 17%, UK 14% and Netherlands at 9% of total storage capacity, however cargoes from Yamal & Qatar are on its way to Europe along with supplies

5 [LNG MARKET ANALYSIS ] 5 from Algeria and Norway. NBP UK Spot price closed at 55.13P/Thm ($7.79/MMBTU) on Friday, with front month April at Pence/Thm ($6.97/MMBTU). TTF Spot price closed at 20.61/MWH ($7.46/MMBTU), whereas front month (April) price closed at 18.46/MWH ($6.69/MMBTU) on Friday. SW Europe gas hub prices also remained bullish predominantly on lower inventory level in France as Nuclear and Hydro based power generation is regular in Spain and France. Spain hydro-based electricity generation increased to 8.62 TWH from 7.34 TWH last week, last year the number was at TWH. French Day Ahead prices: PEG Nord closed at 20.68/MWH ($7.49/MMBTU) whereas TRS France also closed at 20.63/MWH ($7.47/MMBTU) on Friday. Italian PSV closed at 22.10/MWH ($8.64/MMBTU) and Iberian Day Ahead price at 22.80/8MWH ($8.26/MMBTU). Front month PEG Nord remained bearish with closure at 18.69/MWH ($6.77/MMBTU), while TRS France following the same trend and closed at 19.08/MWH ($6.91/MMBTU), PSV at 20.31/MWH ($7.36/MMBTU), whereas Iberian forward price on Friday at 19.88/MWH ($7.20/MMBTU). Weekly European Gas and LNG quantities at Storage and LNG terminals (BCF) One standard size Vessel of 150,000 m 3 equals to 3.42 BCF. Belgium France Germany Greece Italy Lithuania Netherlands Poland Portugal Spain UK Quantity in BCF 23- Mar Mar Mar Mar- 18 Gas LNG Total Capacity Utilization 9% 6% 9% 14% Gas LNG Total Capacity Utilization 5% 8% 9% 13% Gas LNG Total Capacity Utilization 16% 20% 21% 25% Gas LNG Total Capacity Utilization 84% 87% 90% 45% Gas LNG Total Capacity Utilization 34% 37% 38% 41% Gas LNG Total Capacity Utilization 54% 63% 15% 26% Gas LNG Total Capacity Utilization 8% 12% 14% 18% Gas LNG Total Capacity Utilization 37% 41% 40% 44% Gas LNG Total Capacity Utilization 45% 38% 46% 40% Gas LNG Total Capacity Utilization 45% 45% 46% 47% Gas LNG Total Capacity Utilization 13% 33% 16% 28%

6 LNG Trade Flows 17 th 23 rd March 2018 LNG merchant data is developed in collaboration with Clipper Data LLC Supply Trade Flows 87 vessels carrying 5.50 million tons (263.8 BCF) left supply terminal centres. [LNG MARKET ANALYSIS ] 6 Demand Trade Flows 99 vessels carrying 6.09 million tons (292.8 BCF) reached demand centres. W-Country- within same country delivery & TBC To Be Communicated Disclaimer: This is a personal analysis based upon public information and should not be used for buying and selling of commodities. Source: EIA, REE & GIE.